The importance of entering and exiting the market at the right time

Some argue that the current market is not suitable for short-term traders and that only the medium and long-term investors can make be profitable.

That may be true for most, but it does not mean using short-term strategies cannot profitable.

This is why today we are having a look at the follow-up strategy, a short-term tactic that aims at profiting from trend breakouts when they have already began to gain traction.

Do not seek to buy at the lowest price, and not enter before the trend starts

First of all, do not aim at buying at the bottom - no matter how skilled you are, you cannot really tell whether the bottom you are seeing is real. Big players may create one bottom after another to build up their position, and then pull up, before finally breakthrough.

This is why the first principle of the follow-up strategy is confirming that the market trend has really started before entering a position.

Usually, this mean that the price has already been increasing even by 10 to 20%. Do not be greedy cry foul over this chunk of the profit and enter the market only after a clear trend is formed.

Stage your market entry, do not build heavy positions at the very beginning

Do not crash into the market using a single large position. Rather, enter your positions in batches. In other words, a small amount can be traded first to see if the operation makes sense or need to be aborted.

If you intend to take on a large positon, the safest way might be to start with 10% to 20% of the capital you intend to invest in his specific move - not your total available capital, which should always be managed according to the principles of proper risk management - and then gradually increase after you are confident with your trading signals.

If the amount is relatively small, the position building process could be carried out over 2-3 attempts, each time 1/2 or 1/3 of the selected capital.

At any time keep in mind that it is impossible to buy the lowest price all at once. If that happens it is likely the result of luck. And as any good trader knows, luck always runs out sooner or later.

Do not necessarily be afraid of high prices

Traders who are new to the crypto world are often under the impression that if an asset has recently witnessed a large increase in value it might be risky and unsuitable for further investment.  

In reality, due to the high volatility charasteristic of cryptocurrencies, large price jumps do not necessarily mean that an abrupt revrsal is on the cards.  Some currencies can rise and then rise again.

To judge whether an asset is worth investing in, the key is to see whether there is any sign of active big players at the current price to gauge whether the coin is likely to rise in the future, not how much it has risen in the past. If a currency rises with small trading volume, it is difficult to say that it has no room for growth.

Shorting assets with moving averages

One of the most commonly adopted indicators to decide points of entry and exits are moving averages. They are used for stocks, forex, commodities. And, of course, crypto.

Without getting deep into how they are calculated, here are four scenarios that you might find when trading.

In all cases, bear in mind that in order to verify the reliability of a buy/sell signal, multiple moving averages can be used. Under common circumstances, the trading volume will also provide valuable information, depending on whether it shows buying or selling pressure.

1. The moving average first shows a sharp upward trend, but after a period of rising, it begins to flatten. When the price falls from the top and breaks through the moving average, it is a signal to sell.

2. The price breaks through the moving average from bottom to top, but it immediately falls back. When this happens, it is a sell signal. This sell signal is particularly valid if after falling the price rebounds to about one-third of the previous decline and then resumes a downward trend.

3. The moving average is gradually falling. The price fluctuates below the moving average for a period of time, and then it starts to rise faster than the moving average. If upon approaching the moving average line it drops and falls, this may be a good moment to sell.

4. The moving average is rising, but the price has risen even faster, ending up above the moving average, and the deviation from the moving average is getting bigger and bigger. In this case, it is a good idea to calculate the deviation rate. If the deviation rate has reached 30%-50%, and at the same time, the price starts to reverse rapidly this is the signal to sell.

Notice that this material is purely educational and does not constitute financial advice. Trading involves significant risks. You should only be trading what you can afford to lose.